Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, Relating to Amendments to the Clearing Membership Policy and Clearing Membership Procedures, 74214-74217 [2023-23814]

Download as PDF 74214 Federal Register / Vol. 88, No. 208 / Monday, October 30, 2023 / Notices Applicants request an order to permit certain registered closed-end investment companies to issue multiple classes of shares and to impose asset-based distribution and/or service fees and early withdrawal charges. SUMMARY OF APPLICATION: Eaton Vance Floating-Rate Opportunities Fund and Eaton Vance Management. For the Commission, by the Division of Investment Management, under delegated authority. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–23876 Filed 10–27–23; 8:45 am] BILLING CODE 8011–01–P APPLICANTS: The application was filed on March 15, 2023, and amended on April 11, 2023 and August 18, 2023. FILING DATES: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC’s Secretary at Secretarys-Office@sec.gov and serving the Applicants with a copy of the request by email, if an email address is listed for the relevant Applicant below, or personally or by mail, if a physical address is listed for the relevant Applicant below. Hearing requests should be received by the Commission by 5:30 p.m. on November 20, 2023, and should be accompanied by proof of service on the Applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to rule 0– 5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary. HEARING OR NOTIFICATION OF HEARING: The Commission: Secretarys-Office@sec.gov. Applicants: Deidre E. Walsh, Eaton Vance Management, dwalsh@eatonvance.com; with a copy to Sarah Clinton, Ropes & Gray LLP, sarah.clinton@ropesgray.com. ADDRESSES: FOR FURTHER INFORMATION CONTACT: Adam Large, Senior Special Counsel, at (202) 551–7358 (Division of Investment Management, Chief Counsel’s Office). For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ amended application, dated August 18, 2023, which may be obtained via the Commission’s website by searching for the file number at the top of this document, or for an Applicant using the Company name search field on the SEC’s EDGAR system. The SEC’s EDGAR system may be searched at https://www.sec.gov/ edgar/searchedgar/legacy/ companysearch.html. You may also call the SEC’s Public Reference Room at (202) 551–8090. khammond on DSKJM1Z7X2PROD with NOTICES SUPPLEMENTARY INFORMATION: VerDate Sep<11>2014 18:18 Oct 27, 2023 Jkt 262001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98790; File No. SR–ICEEU– 2023–022] Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change, as Modified by Amendment No. 1, Relating to Amendments to the Clearing Membership Policy and Clearing Membership Procedures October 24, 2023. I. Introduction On August 8, 2023, ICE Clear Europe Limited (‘‘ICEEU’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change to modify its Clearing Membership Policy (‘‘Policy’’) and Clearing Membership Procedures (‘‘Procedures’’). On August 22, 2023, ICE Clear Europe filed Amendment No. 1 to the proposed rule change to make certain changes to the Exhibits 5A and 5B.3 Notice of the proposed rule change, as modified by Amendment No. 1, was published for comment in the Federal Register on August 29, 2023.4 The Commission has not received any comments on the proposed rule change, as modified by Amendment No. 1 (hereinafter ‘‘Proposed Rule Change’’). For the reasons discussed below, the Commission is approving the Proposed Rule Change.5 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Amendment No. 1 amends the Exhibit 5A and Exhibit 5B to correctly reflect the addition of the Document Handling subsection to each document’s Table of Contents. The proposed rule change includes an Exhibit 4A and Exhibit 4B. Exhibit 4A shows the change that Amendment No. 1 makes to Exhibit 5A, and Exhibit 4B does the same with respect to Exhibit 5B. 4 Securities Exchange Act Release No. 98207 (August 23, 2023), 88 FR 59547 (August 29, 2023) (File No. SR–ICEEU–2023–022) (‘‘Notice’’). 5 Capitalized terms not otherwise defined herein have the meanings assigned to them in the Policy or the Procedures or, if not defined therein, ICE Clear Europe’s Clearing Rules. 2 17 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 II. Description of the Proposed Rule Change ICEEU is registered with the Commission as a clearing agency for the purpose of clearing security-based swaps. In its role as a clearing agency for clearing security-based swaps, ICEEU provides services to its Clearing Members. ICEEU’s Clearing Members enter into a Clearing Membership Agreement with ICEEU and are admitted as clearing members of ICEEU under Part 2 of ICEEU’s clearing rules.6 As a result of its relationship with its Clearing Members, ICEEU faces a number of risks. For example, ICEEU’s Clearing Members may not meet membership criteria which ultimately could increase the chances of both a Clearing Member defaulting and ICEEU needing to use mutualized funds.7 ICEEU manages these risks, and relationships with its Clearing Members, through the Policy and the Procedures. The Policy describes ICEEU’s membership criteria and related processes for assessing applicants for membership, on-going monitoring of its Clearing Members, and termination of its Clearing Members. The Procedures in turn provide additional detail as to how ICE Clear Europe applies its policies for reviewing applications for clearing membership, variations of permissions for Clearing Members, ongoing monitoring of Clearing Members, and termination of clearing membership.8 Through the Proposed Rule Change, ICEEU proposes to make changes to both the Policy and the Procedures.9 These proposed changes correct an improper reference to model documents; clarify that clearing members must provide notice of certain situations; update sections on monitoring membership criteria; update sections on document governance; update the Procedures’ clearing membership application process; and clarify that ICEEU may take certain steps in its absolute discretion. 1. Correction of Improper Reference to Model Documents in the Policy The current Policy notes that procedural aspects and relevant 6 The Clearing Membership Agreement is an agreement between ICEEU and a Clearing Member under which the Clearing House agrees to provide clearing in respect of Contracts to that Clearing Member and that Clearing Member agrees to be bound by and subject to ICEEU’s Clearing Rules. ICE Clear Europe Clearing Rule 101. 7 Clearing Membership Policy 2.1. 8 Securities Exchange Act Release No. 93178 (Sept. 29, 2021), 86 FR 55045, 55046 (Oct. 5, 2021) (File No. SR–ICEEU–2021–014). 9 In addition to the changes described below, ICEEU proposes various non-substantive changes to the Policy and Procedures. E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 88, No. 208 / Monday, October 30, 2023 / Notices parameters related to the Policy are set out in the corresponding procedures and model documents. However, Policy parameters are set forth in parameter documents, not model documents.10 Therefore the Proposed Rule Change would remove the reference to model documents and state instead that procedural aspects and relevant parameters related to the Policy are set out in the corresponding procedures and parameter documents respectively. khammond on DSKJM1Z7X2PROD with NOTICES 2. Requiring Clearing Members To Provide Certain Notifications in the Policy and Procedures In the ‘‘Objective’’ section of the current Policy, ICEEU notes that it achieves the objectives of the Policy by, among other things, ‘‘includ[ing] relevant notifications to ensure that Clearing Members’’ promptly notify ICEEU of certain changes that could impact their ability to meet ICEEU’s membership criteria. The ‘‘Objective’’ section of the current Procedures includes similar language. The Proposed Rule Change would change this language in both the Policy and the Procedures to specify that ICEEU achieves the objectives of the Policy and Procedures by, among other things, ‘‘requir[ing]’’ that Clearing Members promptly notify ICEEU of any changes to their business which may affect their ability to meet ICEEU’s membership criteria.11 3. Monitoring of Membership Criteria in the Policy The current Policy states that in order to monitor Clearing Members’ on-going adherence to the membership criteria, ICEEU carries out periodic in-depth counterparty reviews; undertakes a quarterly review of financial position using Audited Annual Accounts and quarterly financial information; updates its Counterparty Rating System on a quarterly basis; maintains a Watch List; requires Clearing Members to complete an Annual Member Return; and monitors operational matters daily, including, for example, margin calls and end-of-day price submissions. ICEEU proposes to remove and consolidate much of this text. The Policy as revised would state that in order to monitor Clearing Members’ on-going adherence to the membership criteria, ICEEU carries out periodic in-depth counterparty reviews; undertakes ongoing monitoring, which consists of continuous monitoring and additional trigger-based reviews, including relating to credit and AML/KYC risk and to 10 Notice, 88 FR at 59548. 11 Id. VerDate Sep<11>2014 18:18 Oct 27, 2023 Jkt 262001 daily operational matters (such as margin calls); and requires Clearing Members to complete an Annual Member Return. ICEEU proposes to remove the text discussing quarterly review of financial position through Audited Annual Accounts and financial information, updates to its Counter Party Rating System done quarterly, and the requirement to maintain a Watch List because these subjects relate to credit issues that are covered in its Counterparty Credit Risk Policy and Procedures.12 Given the deletion of this text, ICEEU proposes to remove the sentence noting that information on monitoring is available in the Clearing Membership Procedures and the Counterparty Credit Risk Policy because ICEEU believes this cross reference to support now-deleted references would no longer be necessary.13 Finally, ICEEU proposes deleting the sentence that provides that ICEEU monitors a number of specific operational matters daily because it would be replaced with the text noting that ICEEU undertakes ongoing monitoring. 4. Document Governance in the Policy and Procedures The Proposed Rule Change would update the Document Governance and Exception Handling sections of both the Policy and the Procedures to make them consistent with similar document governance provisions in other ICEEU policies.14 The updates would specify that the scope of the document review encompasses, at a minimum, regulatory compliance, documentation and purpose, implementation, use, and open items from previous validations or reviews (where appropriate). The Proposed Rule Change would also add text identifying the document owner or relevant staff as the individuals responsible for conducting document reviews to ensure they are updated and reviewed in accordance with the internal governance processes. The changes would also specify that the head of the department (or their delegate) and the Chief Risk Officer (or their delegate) provide approval for document reviews and that, in some circumstances, the document review findings are reported to the Model 12 Id. 13 Id. 14 Id. For example, ICEEU recently amended its Recovery Plan and Outsourcing Policy to make changes similar to those now proposed. See Securities Exchange Act Release No. 98337 (Sept. 8, 2023), 88 FR 63149, 63154–55 (Sept. 14, 2023) (File No. SR–ICEEU–2023–020) (Recovery Plan); Securities Exchange Act Release No. 98387 (Sept. 14, 2023), 88 FR 64953, 64955 (Sept. 20, 2023) (File No. SR–ICEEU–2023–018) (Outsourcing Policy). PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 74215 Oversight Committee, but outside of those circumstances, the document review’s results, including any findings, are reported to the Executive Risk Committee along with the priority of findings, proposed remediations, and target due date to remediate the findings. The updates also would provide that it is the document owner’s responsibility to address any findings, complete internal governance, and, if necessary, obtain regulatory approvals before the subsequent annual review is due. Finally, the proposed changes would note that changes to the Policy and Procedures must be approved in accordance with ICEEU’s governance process and will take effect after completion of all necessary internal and regulatory approvals. 5. Clearing Membership Procedures The Proposed Rule Change would amend the Clearing Membership Procedures to make certain clarifications and updates. One proposed change would clarify that applicants must provide sufficient evidence, details, and information to ICEEU as required by the Rules, as opposed to sufficient evidence, details, or information.15 Another adds text indicating that the membership team will ensure that all Applicants are added to the schedule of insured entities by the ICE Group insurer. The Proposed Rule Change would also delete a provision noting that after approval of an application by the Executive Risk Committee, the relevant Product Risk Committees would be notified of a new application for clearing membership. ICEEU believes that it is unnecessary to notify the Product Risk Committees because those committees’ duties and functions are not implicated by a new member being admitted.16 ICEEU’s proposed amendments would also clarify that ICEEU issues a Circular confirming approval of a Clearing Member once their application is approved and move a clause indicating that Clearing Members are required to respond to additional information requests in a timely manner statement to a standalone sentence. ICEEU believes stating this requirement in a standalone sentence makes the information clearer.17 6. ICEEU’s Absolute Discretion in the Procedures Throughout the Procedures, ICEEU proposes to add the phrase ‘‘in its absolute discretion’’ in connection with 15 Notice, 88 FR at 59548. 16 Id. 17 Id. E:\FR\FM\30OCN1.SGM 30OCN1 74216 Federal Register / Vol. 88, No. 208 / Monday, October 30, 2023 / Notices certain actions described in the Procedures. Specifically, ICEEU’s proposed changes note that ICEEU has absolute discretion to take certain actions with respect to its minimum capital requirements, standards and characteristics of subordinated loans, the acceptability of a Controller Guarantee, cash or collateral requirements, and its guaranty fund. ICEEU also proposes changes making clear that it defines a maximum period between in-depth counterparty reviews and a threshold for following up with the Clearing Member regarding negative changes to its financial condition in its absolute discretion. ICEEU believes that these amendments do not change its existing authority, but more explicitly state the scope of its discretion.18 III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act requires the Commission to approve a proposed rule change of a self-regulatory organization if it finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the organization.19 For the reasons given below, the Commission finds that the Proposed Rule Change is consistent with Section 17A(b)(3)(F) of the Act 20 and Rules 17Ad–22(e)(2)(i), (e)(2)(v),21 and (e)(18).22 khammond on DSKJM1Z7X2PROD with NOTICES A. Consistency With Section 17A(b)(3)(F) of the Act Under Section 17A(b)(3)(F) of the Act, ICEEU’s rules, among other things, must be ‘‘designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible . . . and, in general, to protect investors and the public interest . . . .’’ 23 Based on its review of the record, and for the reasons discussed below, the Commission concludes that ICEEU’s Proposed Rule Change is consistent with Section 17A(b)(3)(F) of the Act. As noted above, ICEEU faces a number of risks as a result of its relationship with its Clearing Members. These risks include operational, default, and other risks that could impact or 18 Id. 19 15 U.S.C. 78s(b)(2)(C). U.S.C. 78q–1(b)(3)(F). 21 17 CFR 240.17Ad–22(e)(2). 22 17 CFR 240.17Ad–22(e)(18). 23 15 U.S.C. 78q–1(b)(3)(F). 20 15 VerDate Sep<11>2014 18:18 Oct 27, 2023 threaten ICEEU’s ability to clear and settle transactions, safeguard securities and funds which are in its possession or control or for which it is responsible, or otherwise protect investors and the public interest. ICEEU manages these risks through, among other things, the Policy and Procedures. Therefore, improving or enhancing the Policy and Procedures likewise improves or enhances ICEEU’s ability to manage or mitigate the risks it faces as a result of its relationship with its Clearing Members. As discussed above, the Proposed Rule Change would enhance the Policy and Procedures in a number of ways, including clarifying certain provisions, highlighting certain important information, removing incorrect or duplicative information, and ensuring the Policy and Procedures are consistent with each other and with ICEEU’s other policies and procedures. For example, the Proposed Rule Change would clarify in both the Policy and Procedures that Clearing Members must promptly notify ICEEU of any changes to their business which may impact their ability to meet membership criteria. Additionally, the Proposed Rule Change would revise the Procedures to clarify that Clearing Membership applicants must provide sufficient evidence, details, and information to ICEEU as required by the Rules, that ICEEU will issue a Circular confirming approval of a Clearing Member once its membership application is approved, that Clearing Members must respond to information requests from ICEEU in a timely manner, and that ICEEU has absolute discretion to take certain steps.24 Similarly, the Proposed Rule Change would update the Policy to note that procedural aspects and relevant parameters related to the Policy are set out in the corresponding procedures and parameter documents, rather than model documents as the current Policy states, and highlight that procedural aspects related to the Policy are set out in the corresponding procedures. The Proposed Rule Change also would delete as unnecessary and duplicative certain information related to its monitoring of Clearing Members’ financial information because that information is addressed in other ICEEU policies.25 The Proposed Rule Change will help clarify the Policy and Procedures and ensure that they are accurate and consistent both with each other and with ICEEU’s other policies and procedures, which will enhance the ability of ICEEU and its stakeholders to understand the Policy and Procedures and apply them accurately and consistently. Ensuring the Policy and Procedures are easily understood and applied accurately and consistently will, in turn, help ensure that ICEEU effectively manages and mitigates the operational and other risks presented by its relationship with Clearing Members, thereby supporting ICEEU’s ability to promote the prompt and accurate clearance and settlement of securities transactions, assure the safeguarding of securities and funds which are in ICEEU’s custody or control or for which it is responsible, and protect investors and the public interest. For these reasons, the Commission finds that the Proposed Rule Change is consistent with the requirements of Section 17A(b)(3)(F) of the Act.26 B. Consistency With Rule 17Ad– 22(e)(2)(i) and (v) Rules 17Ad–22(e)(2)(i) and (v) require ICEEU to ‘‘establish, implement, maintain, and enforce written policies and procedures reasonably designed to . . . provide for governance arrangements that are clear and transparent . . . and specify clear and direct lines of responsibility.’’ 27 Based on its review of the record, and for the reasons discussed below, the Commission finds that the Proposed Rule Change is consistent with Rule 17Ad–22(e)(2)(i) and (v). The Proposed Rule Change clearly defines responsibilities for a number of ICEEU employees. For instance, in both the Policy and Procedures, the Proposed Rule Change identifies the document owner and relevant staff as responsible for conducting document reviews, remediating findings, completing internal governance, and receiving regulatory approvals. The Proposed Rule Change also would add text to the Procedures that makes clear that the Membership team will ensure that all Applicants are added to the schedule of insured entities by the ICE Group insurer, and would remove as unnecessary text requiring notification of the relevant Product Risk Committees of new applications for clearing membership.28 By defining who has or does not have responsibilities and making this information readily available in the Policy and Procedures the Proposed Rule Change achieves clarity and transparency. The Commission finds, therefore, that the Proposed Rule Change is consistent 26 15 24 Notice, 88 FR at 59548. 25 Id. Jkt 262001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 U.S.C. 78q–1(b)(3)(F). CFR 240.17Ad–22(e)(2). 28 Notice, 88 FR at 59548. 27 17 E:\FR\FM\30OCN1.SGM 30OCN1 Federal Register / Vol. 88, No. 208 / Monday, October 30, 2023 / Notices For the Commission by the Division of Trading and Markets, pursuant to delegated authority.37 Sherry R. Haywood, Assistant Secretary. with the requirements of Rule 17Ad– 22(e)(2)(i) and (v).29 C. Consistency With Rule 17Ad– 22(e)(18) Rule 17Ad–22(e)(18) requires ICEEU to ‘‘establish, implement, maintain, and enforce written policies and procedures reasonably designed to . . . establish objective, risk-based, and publicly disclosed criteria for participation, which permit fair and open access by direct and, where relevant, indirect participants and other financial market utilities, require participants to have sufficient financial resources and robust operational capacity to meet obligations arising from participation in the clearing agency, and monitor compliance with such participation requirements on an ongoing basis.’’ 30 Based on its review of the record, and for the reasons discussed below, the Commission finds that the Proposed Rule Change is consistent with Rule 17Ad–22(e)(18).31 The Proposed Rule Change would update the Policy to specify that ICEEU undertakes ongoing monitoring to monitor Clearing Member’s adherence to membership criteria and that ongoing monitoring consists of continuous monitoring and additional trigger-based reviews, including relating to credit and AML/KYC risk and to daily operational matters (such as margin calls). Because these aspects of the Proposed Rule Change are reasonably designed to help ensure that ICEU monitors compliance with its membership criteria on an ongoing basis, the Commission finds that the Proposed Rule Change is consistent with the requirements of Rule 17Ad–22(e)(18).32 IV. Conclusion On the basis of the foregoing, the Commission finds that the Proposed Rule Change is consistent with the requirements of the Act, and in particular, Section 17A(b)(3)(F) of the Act 33 and Rules 17Ad–22(e)(2)(i), (e)(2)(v),34 and (e)(18) thereunder.35 It is therefore ordered pursuant to Section 19(b)(2) of the Act that the Proposed Rule Change (SR–ICEEU– 2023–022) be, and hereby is, approved.36 khammond on DSKJM1Z7X2PROD with NOTICES 29 17 18:18 Oct 27, 2023 Jkt 262001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98793; File No. SR– CboeBYX–2023–015] Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Related to Physical Port Fees October 24, 2023. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 13, 2023, Cboe BYX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BYX Equities’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe BYX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BYX Equities’’) proposes to amend its Fees Schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/byx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change CFR 240.17Ad–22(e)(2). 30 17 CFR 240.17Ad–22(e)(18). 31 17 CFR 240.17Ad–22(e)(18). 32 17 CFR 240.17Ad–22(e)(18). 33 15 U.S.C. 78q–1(b)(3)(F). 34 17 CFR 240.17Ad–22(e)(2). 35 17 CFR 240.17Ad–22(e)(18). 36 In approving the Proposed Rule Change, the Commission considered the proposal’s impacts on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). VerDate Sep<11>2014 [FR Doc. 2023–23814 Filed 10–27–23; 8:45 am] In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the 37 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 74217 places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule relating to physical connectivity fees.3 By way of background, a physical port is utilized by a Member or non-Member to connect to the Exchange at the data centers where the Exchange’s servers are located. The Exchange currently assesses the following physical connectivity fees for Members and nonMembers on a monthly basis: $2,500 per physical port for a 1 gigabit (‘‘Gb’’) circuit and $7,500 per physical port for a 10 Gb circuit. The Exchange proposes to increase the monthly fee for 10 Gb physical ports from $7,500 to $8,500 per port. The Exchange notes the proposed fee change better enables it to continue to maintain and improve its market technology and services and also notes that the proposed fee amount, even as amended, continues to be in line with, or even lower than, amounts assessed by other exchanges for similar connections.4 The physical ports may also be used to access the Systems for the following affiliate exchanges and only one monthly fee currently (and will continue) to apply per port: the Cboe BZX Exchange, Inc. (options and equities), Cboe EDGX Exchange, Inc. (options and equities platforms), Cboe 3 The Exchange initially filed the proposed fee changes on July 3, 2023 (SR–CboeBYX–2023–010). On September 1, 2023, the Exchange withdrew that filing and submitted SR-CboeBYX–2023–013. On September 29, 2023, the Securities and Exchange Commission issued a Suspension of and Order Instituting Proceedings to Determine whether to Approve or Disapprove a Proposed Rule Change to Amend its Fees Schedule Related to Physical Port Fees (the ‘‘OIP’’). On September 29, 2023, the Exchange filed the proposed fee change (SR– CboeBYX–2023–014). On October 13, 2023, the Exchange withdrew that filing and submitted this filing. No comment letters were received in connection with any of the foregoing rule filings. 4 See e.g., The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection to the respective exchange, which is analogous to the Exchange’s 10Gb physical port. See also New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN Circuits (which are analogous to the Exchange’s 10 Gb physical port) are assessed $22,000 per month, per port. E:\FR\FM\30OCN1.SGM 30OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 208 (Monday, October 30, 2023)]
[Notices]
[Pages 74214-74217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-23814]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98790; File No. SR-ICEEU-2023-022]


Self-Regulatory Organizations; ICE Clear Europe Limited; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1, 
Relating to Amendments to the Clearing Membership Policy and Clearing 
Membership Procedures

October 24, 2023.

I. Introduction

    On August 8, 2023, ICE Clear Europe Limited (``ICEEU'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to modify its 
Clearing Membership Policy (``Policy'') and Clearing Membership 
Procedures (``Procedures''). On August 22, 2023, ICE Clear Europe filed 
Amendment No. 1 to the proposed rule change to make certain changes to 
the Exhibits 5A and 5B.\3\ Notice of the proposed rule change, as 
modified by Amendment No. 1, was published for comment in the Federal 
Register on August 29, 2023.\4\ The Commission has not received any 
comments on the proposed rule change, as modified by Amendment No. 1 
(hereinafter ``Proposed Rule Change''). For the reasons discussed 
below, the Commission is approving the Proposed Rule Change.\5\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 amends the Exhibit 5A and Exhibit 5B to 
correctly reflect the addition of the Document Handling subsection 
to each document's Table of Contents. The proposed rule change 
includes an Exhibit 4A and Exhibit 4B. Exhibit 4A shows the change 
that Amendment No. 1 makes to Exhibit 5A, and Exhibit 4B does the 
same with respect to Exhibit 5B.
    \4\ Securities Exchange Act Release No. 98207 (August 23, 2023), 
88 FR 59547 (August 29, 2023) (File No. SR-ICEEU-2023-022) 
(``Notice'').
    \5\ Capitalized terms not otherwise defined herein have the 
meanings assigned to them in the Policy or the Procedures or, if not 
defined therein, ICE Clear Europe's Clearing Rules.
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II. Description of the Proposed Rule Change

    ICEEU is registered with the Commission as a clearing agency for 
the purpose of clearing security-based swaps. In its role as a clearing 
agency for clearing security-based swaps, ICEEU provides services to 
its Clearing Members. ICEEU's Clearing Members enter into a Clearing 
Membership Agreement with ICEEU and are admitted as clearing members of 
ICEEU under Part 2 of ICEEU's clearing rules.\6\
---------------------------------------------------------------------------

    \6\ The Clearing Membership Agreement is an agreement between 
ICEEU and a Clearing Member under which the Clearing House agrees to 
provide clearing in respect of Contracts to that Clearing Member and 
that Clearing Member agrees to be bound by and subject to ICEEU's 
Clearing Rules. ICE Clear Europe Clearing Rule 101.
---------------------------------------------------------------------------

    As a result of its relationship with its Clearing Members, ICEEU 
faces a number of risks. For example, ICEEU's Clearing Members may not 
meet membership criteria which ultimately could increase the chances of 
both a Clearing Member defaulting and ICEEU needing to use mutualized 
funds.\7\ ICEEU manages these risks, and relationships with its 
Clearing Members, through the Policy and the Procedures. The Policy 
describes ICEEU's membership criteria and related processes for 
assessing applicants for membership, on-going monitoring of its 
Clearing Members, and termination of its Clearing Members. The 
Procedures in turn provide additional detail as to how ICE Clear Europe 
applies its policies for reviewing applications for clearing 
membership, variations of permissions for Clearing Members, ongoing 
monitoring of Clearing Members, and termination of clearing 
membership.\8\
---------------------------------------------------------------------------

    \7\ Clearing Membership Policy 2.1.
    \8\ Securities Exchange Act Release No. 93178 (Sept. 29, 2021), 
86 FR 55045, 55046 (Oct. 5, 2021) (File No. SR-ICEEU-2021-014).
---------------------------------------------------------------------------

    Through the Proposed Rule Change, ICEEU proposes to make changes to 
both the Policy and the Procedures.\9\ These proposed changes correct 
an improper reference to model documents; clarify that clearing members 
must provide notice of certain situations; update sections on 
monitoring membership criteria; update sections on document governance; 
update the Procedures' clearing membership application process; and 
clarify that ICEEU may take certain steps in its absolute discretion.
---------------------------------------------------------------------------

    \9\ In addition to the changes described below, ICEEU proposes 
various non-substantive changes to the Policy and Procedures.
---------------------------------------------------------------------------

1. Correction of Improper Reference to Model Documents in the Policy

    The current Policy notes that procedural aspects and relevant

[[Page 74215]]

parameters related to the Policy are set out in the corresponding 
procedures and model documents. However, Policy parameters are set 
forth in parameter documents, not model documents.\10\ Therefore the 
Proposed Rule Change would remove the reference to model documents and 
state instead that procedural aspects and relevant parameters related 
to the Policy are set out in the corresponding procedures and parameter 
documents respectively.
---------------------------------------------------------------------------

    \10\ Notice, 88 FR at 59548.
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2. Requiring Clearing Members To Provide Certain Notifications in the 
Policy and Procedures

    In the ``Objective'' section of the current Policy, ICEEU notes 
that it achieves the objectives of the Policy by, among other things, 
``includ[ing] relevant notifications to ensure that Clearing Members'' 
promptly notify ICEEU of certain changes that could impact their 
ability to meet ICEEU's membership criteria. The ``Objective'' section 
of the current Procedures includes similar language. The Proposed Rule 
Change would change this language in both the Policy and the Procedures 
to specify that ICEEU achieves the objectives of the Policy and 
Procedures by, among other things, ``requir[ing]'' that Clearing 
Members promptly notify ICEEU of any changes to their business which 
may affect their ability to meet ICEEU's membership criteria.\11\
---------------------------------------------------------------------------

    \11\ Id.
---------------------------------------------------------------------------

3. Monitoring of Membership Criteria in the Policy

    The current Policy states that in order to monitor Clearing 
Members' on-going adherence to the membership criteria, ICEEU carries 
out periodic in-depth counterparty reviews; undertakes a quarterly 
review of financial position using Audited Annual Accounts and 
quarterly financial information; updates its Counterparty Rating System 
on a quarterly basis; maintains a Watch List; requires Clearing Members 
to complete an Annual Member Return; and monitors operational matters 
daily, including, for example, margin calls and end-of-day price 
submissions. ICEEU proposes to remove and consolidate much of this 
text. The Policy as revised would state that in order to monitor 
Clearing Members' on-going adherence to the membership criteria, ICEEU 
carries out periodic in-depth counterparty reviews; undertakes ongoing 
monitoring, which consists of continuous monitoring and additional 
trigger-based reviews, including relating to credit and AML/KYC risk 
and to daily operational matters (such as margin calls); and requires 
Clearing Members to complete an Annual Member Return.
    ICEEU proposes to remove the text discussing quarterly review of 
financial position through Audited Annual Accounts and financial 
information, updates to its Counter Party Rating System done quarterly, 
and the requirement to maintain a Watch List because these subjects 
relate to credit issues that are covered in its Counterparty Credit 
Risk Policy and Procedures.\12\ Given the deletion of this text, ICEEU 
proposes to remove the sentence noting that information on monitoring 
is available in the Clearing Membership Procedures and the Counterparty 
Credit Risk Policy because ICEEU believes this cross reference to 
support now-deleted references would no longer be necessary.\13\ 
Finally, ICEEU proposes deleting the sentence that provides that ICEEU 
monitors a number of specific operational matters daily because it 
would be replaced with the text noting that ICEEU undertakes ongoing 
monitoring.
---------------------------------------------------------------------------

    \12\ Id.
    \13\ Id.
---------------------------------------------------------------------------

4. Document Governance in the Policy and Procedures

    The Proposed Rule Change would update the Document Governance and 
Exception Handling sections of both the Policy and the Procedures to 
make them consistent with similar document governance provisions in 
other ICEEU policies.\14\ The updates would specify that the scope of 
the document review encompasses, at a minimum, regulatory compliance, 
documentation and purpose, implementation, use, and open items from 
previous validations or reviews (where appropriate). The Proposed Rule 
Change would also add text identifying the document owner or relevant 
staff as the individuals responsible for conducting document reviews to 
ensure they are updated and reviewed in accordance with the internal 
governance processes. The changes would also specify that the head of 
the department (or their delegate) and the Chief Risk Officer (or their 
delegate) provide approval for document reviews and that, in some 
circumstances, the document review findings are reported to the Model 
Oversight Committee, but outside of those circumstances, the document 
review's results, including any findings, are reported to the Executive 
Risk Committee along with the priority of findings, proposed 
remediations, and target due date to remediate the findings. The 
updates also would provide that it is the document owner's 
responsibility to address any findings, complete internal governance, 
and, if necessary, obtain regulatory approvals before the subsequent 
annual review is due. Finally, the proposed changes would note that 
changes to the Policy and Procedures must be approved in accordance 
with ICEEU's governance process and will take effect after completion 
of all necessary internal and regulatory approvals.
---------------------------------------------------------------------------

    \14\ Id. For example, ICEEU recently amended its Recovery Plan 
and Outsourcing Policy to make changes similar to those now 
proposed. See Securities Exchange Act Release No. 98337 (Sept. 8, 
2023), 88 FR 63149, 63154-55 (Sept. 14, 2023) (File No. SR-ICEEU-
2023-020) (Recovery Plan); Securities Exchange Act Release No. 98387 
(Sept. 14, 2023), 88 FR 64953, 64955 (Sept. 20, 2023) (File No. SR-
ICEEU-2023-018) (Outsourcing Policy).
---------------------------------------------------------------------------

5. Clearing Membership Procedures

    The Proposed Rule Change would amend the Clearing Membership 
Procedures to make certain clarifications and updates. One proposed 
change would clarify that applicants must provide sufficient evidence, 
details, and information to ICEEU as required by the Rules, as opposed 
to sufficient evidence, details, or information.\15\ Another adds text 
indicating that the membership team will ensure that all Applicants are 
added to the schedule of insured entities by the ICE Group insurer. The 
Proposed Rule Change would also delete a provision noting that after 
approval of an application by the Executive Risk Committee, the 
relevant Product Risk Committees would be notified of a new application 
for clearing membership. ICEEU believes that it is unnecessary to 
notify the Product Risk Committees because those committees' duties and 
functions are not implicated by a new member being admitted.\16\ 
ICEEU's proposed amendments would also clarify that ICEEU issues a 
Circular confirming approval of a Clearing Member once their 
application is approved and move a clause indicating that Clearing 
Members are required to respond to additional information requests in a 
timely manner statement to a standalone sentence. ICEEU believes 
stating this requirement in a standalone sentence makes the information 
clearer.\17\
---------------------------------------------------------------------------

    \15\ Notice, 88 FR at 59548.
    \16\ Id.
    \17\ Id.
---------------------------------------------------------------------------

6. ICEEU's Absolute Discretion in the Procedures

    Throughout the Procedures, ICEEU proposes to add the phrase ``in 
its absolute discretion'' in connection with

[[Page 74216]]

certain actions described in the Procedures. Specifically, ICEEU's 
proposed changes note that ICEEU has absolute discretion to take 
certain actions with respect to its minimum capital requirements, 
standards and characteristics of subordinated loans, the acceptability 
of a Controller Guarantee, cash or collateral requirements, and its 
guaranty fund. ICEEU also proposes changes making clear that it defines 
a maximum period between in-depth counterparty reviews and a threshold 
for following up with the Clearing Member regarding negative changes to 
its financial condition in its absolute discretion. ICEEU believes that 
these amendments do not change its existing authority, but more 
explicitly state the scope of its discretion.\18\
---------------------------------------------------------------------------

    \18\ Id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act requires the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to the 
organization.\19\ For the reasons given below, the Commission finds 
that the Proposed Rule Change is consistent with Section 17A(b)(3)(F) 
of the Act \20\ and Rules 17Ad-22(e)(2)(i), (e)(2)(v),\21\ and 
(e)(18).\22\
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    \19\ 15 U.S.C. 78s(b)(2)(C).
    \20\ 15 U.S.C. 78q-1(b)(3)(F).
    \21\ 17 CFR 240.17Ad-22(e)(2).
    \22\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

A. Consistency With Section 17A(b)(3)(F) of the Act

    Under Section 17A(b)(3)(F) of the Act, ICEEU's rules, among other 
things, must be ``designed to promote the prompt and accurate clearance 
and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions, to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible . . . and, in general, to protect investors and the public 
interest . . . .'' \23\ Based on its review of the record, and for the 
reasons discussed below, the Commission concludes that ICEEU's Proposed 
Rule Change is consistent with Section 17A(b)(3)(F) of the Act.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    As noted above, ICEEU faces a number of risks as a result of its 
relationship with its Clearing Members. These risks include 
operational, default, and other risks that could impact or threaten 
ICEEU's ability to clear and settle transactions, safeguard securities 
and funds which are in its possession or control or for which it is 
responsible, or otherwise protect investors and the public interest. 
ICEEU manages these risks through, among other things, the Policy and 
Procedures. Therefore, improving or enhancing the Policy and Procedures 
likewise improves or enhances ICEEU's ability to manage or mitigate the 
risks it faces as a result of its relationship with its Clearing 
Members.
    As discussed above, the Proposed Rule Change would enhance the 
Policy and Procedures in a number of ways, including clarifying certain 
provisions, highlighting certain important information, removing 
incorrect or duplicative information, and ensuring the Policy and 
Procedures are consistent with each other and with ICEEU's other 
policies and procedures. For example, the Proposed Rule Change would 
clarify in both the Policy and Procedures that Clearing Members must 
promptly notify ICEEU of any changes to their business which may impact 
their ability to meet membership criteria. Additionally, the Proposed 
Rule Change would revise the Procedures to clarify that Clearing 
Membership applicants must provide sufficient evidence, details, and 
information to ICEEU as required by the Rules, that ICEEU will issue a 
Circular confirming approval of a Clearing Member once its membership 
application is approved, that Clearing Members must respond to 
information requests from ICEEU in a timely manner, and that ICEEU has 
absolute discretion to take certain steps.\24\ Similarly, the Proposed 
Rule Change would update the Policy to note that procedural aspects and 
relevant parameters related to the Policy are set out in the 
corresponding procedures and parameter documents, rather than model 
documents as the current Policy states, and highlight that procedural 
aspects related to the Policy are set out in the corresponding 
procedures. The Proposed Rule Change also would delete as unnecessary 
and duplicative certain information related to its monitoring of 
Clearing Members' financial information because that information is 
addressed in other ICEEU policies.\25\
---------------------------------------------------------------------------

    \24\ Notice, 88 FR at 59548.
    \25\ Id.
---------------------------------------------------------------------------

    The Proposed Rule Change will help clarify the Policy and 
Procedures and ensure that they are accurate and consistent both with 
each other and with ICEEU's other policies and procedures, which will 
enhance the ability of ICEEU and its stakeholders to understand the 
Policy and Procedures and apply them accurately and consistently. 
Ensuring the Policy and Procedures are easily understood and applied 
accurately and consistently will, in turn, help ensure that ICEEU 
effectively manages and mitigates the operational and other risks 
presented by its relationship with Clearing Members, thereby supporting 
ICEEU's ability to promote the prompt and accurate clearance and 
settlement of securities transactions, assure the safeguarding of 
securities and funds which are in ICEEU's custody or control or for 
which it is responsible, and protect investors and the public interest.
    For these reasons, the Commission finds that the Proposed Rule 
Change is consistent with the requirements of Section 17A(b)(3)(F) of 
the Act.\26\
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(2)(i) and (v)

    Rules 17Ad-22(e)(2)(i) and (v) require ICEEU to ``establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to . . . provide for governance arrangements that 
are clear and transparent . . . and specify clear and direct lines of 
responsibility.'' \27\ Based on its review of the record, and for the 
reasons discussed below, the Commission finds that the Proposed Rule 
Change is consistent with Rule 17Ad-22(e)(2)(i) and (v).
---------------------------------------------------------------------------

    \27\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

    The Proposed Rule Change clearly defines responsibilities for a 
number of ICEEU employees. For instance, in both the Policy and 
Procedures, the Proposed Rule Change identifies the document owner and 
relevant staff as responsible for conducting document reviews, 
remediating findings, completing internal governance, and receiving 
regulatory approvals. The Proposed Rule Change also would add text to 
the Procedures that makes clear that the Membership team will ensure 
that all Applicants are added to the schedule of insured entities by 
the ICE Group insurer, and would remove as unnecessary text requiring 
notification of the relevant Product Risk Committees of new 
applications for clearing membership.\28\ By defining who has or does 
not have responsibilities and making this information readily available 
in the Policy and Procedures the Proposed Rule Change achieves clarity 
and transparency.
---------------------------------------------------------------------------

    \28\ Notice, 88 FR at 59548.
---------------------------------------------------------------------------

    The Commission finds, therefore, that the Proposed Rule Change is 
consistent

[[Page 74217]]

with the requirements of Rule 17Ad-22(e)(2)(i) and (v).\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(18)

    Rule 17Ad-22(e)(18) requires ICEEU to ``establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to . . . establish objective, risk-based, and publicly 
disclosed criteria for participation, which permit fair and open access 
by direct and, where relevant, indirect participants and other 
financial market utilities, require participants to have sufficient 
financial resources and robust operational capacity to meet obligations 
arising from participation in the clearing agency, and monitor 
compliance with such participation requirements on an ongoing basis.'' 
\30\ Based on its review of the record, and for the reasons discussed 
below, the Commission finds that the Proposed Rule Change is consistent 
with Rule 17Ad-22(e)(18).\31\
---------------------------------------------------------------------------

    \30\ 17 CFR 240.17Ad-22(e)(18).
    \31\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

    The Proposed Rule Change would update the Policy to specify that 
ICEEU undertakes ongoing monitoring to monitor Clearing Member's 
adherence to membership criteria and that ongoing monitoring consists 
of continuous monitoring and additional trigger-based reviews, 
including relating to credit and AML/KYC risk and to daily operational 
matters (such as margin calls). Because these aspects of the Proposed 
Rule Change are reasonably designed to help ensure that ICEU monitors 
compliance with its membership criteria on an ongoing basis, the 
Commission finds that the Proposed Rule Change is consistent with the 
requirements of Rule 17Ad-22(e)(18).\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
Proposed Rule Change is consistent with the requirements of the Act, 
and in particular, Section 17A(b)(3)(F) of the Act \33\ and Rules 17Ad-
22(e)(2)(i), (e)(2)(v),\34\ and (e)(18) thereunder.\35\
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78q-1(b)(3)(F).
    \34\ 17 CFR 240.17Ad-22(e)(2).
    \35\ 17 CFR 240.17Ad-22(e)(18).
---------------------------------------------------------------------------

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the Proposed Rule Change (SR-ICEEU-2023-022) be, and hereby is, 
approved.\36\
---------------------------------------------------------------------------

    \36\ In approving the Proposed Rule Change, the Commission 
considered the proposal's impacts on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-23814 Filed 10-27-23; 8:45 am]
BILLING CODE 8011-01-P

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